We recognise that many bodies met their reporting duties and entered the backlog because of wider capacity and system issues. The fee variation does not assign fault to a body. The Appointing Person Regulations provide the route for recovering eligible audit costs, while MHCLG’s build-back grant provides the funding route for affected bodies.
MHCLG has stated that build-back grant payments will fund eligible project costs. The timing of a firm’s invoice and the grant payment may differ. MHCLG controls the grant process and will provide information on allocations and payment timing.
MHCLG stated:
“MHCLG has restated its position that it will incorporate the project change costs into its review of the grant allocation formula this autumn so that the project change costs charged to bodies are reflected in future build-back grant payments.”
Firms are expected to prepare a total build-back cost estimate for each individual audit and share it with the relevant body and MHCLG.
This will give bodies early sight of the expected costs and the assumptions supporting them.
The estimate will reflect the evidence, risks and work expected for that audit. We will use the estimate as a baseline when reviewing fee variation proposals, although the final cost may change if the scope, risks or circumstances of the audit change.
MHCLG has confirmed that build-back grant payments will fund eligible project costs charged through PSAA’s fee variation process. MHCLG included these costs in its review of the grant allocation formula.
MHCLG stated:
“MHCLG has restated its position that it will incorporate the project change costs into its review of the grant allocation formula this autumn so that the project change costs charged to bodies are reflected in future build-back grant payments.”
We publish an annual fees research and information paper to help bodies understand the main factors likely to affect audit fees and future fee variations. The paper draws on information from firms, approved fee variations, changes in audit requirements and our wider fees research.
The information paper for 2024/25 audits is available on our website.
The paper provides a sector-wide view rather than a forecast for each body. Individual fee variations depend on the risks, evidence and work required for each audit.
For bodies with only VFM arrangements-related fees and the fees for issuing a disclaimer opinion, there will be no separate scale fee charge.
For all other fee variations this will depend on the circumstances of each body. Please note that for a disclaimed audit we will assess separately any fees in relation to audit work in response to elector queries and objections.
Yes, PSAA has reduced scale fees where changes in circumstances have reduced the level of recurring audit work required. Examples include where a group entity has been brought back in-house, or where a PFI scheme has ended.
Our objective is for scale fees to reflect the audit work expected to be required. Changes in circumstances may therefore result in either increases or reductions over time.
When setting scale fees, we consider approved fee variations and other relevant information about changes in recurring audit work. Where a reduction in audit work becomes apparent after the scale fee has been set, it may be addressed through a negative fee variation.
PSAA must follow the requirements of the Local Audit (Appointing Person) Regulations 2015.
The information we use to set the scale fees includes the previous year’s fees, fee variations that relate to recurrent requirements, and any new audit requirements. We consult annually on the proposed fee scale, and individual scale fees are published on this website by the end of November each year once the fee scale is confirmed by our Board following consultation.
We continue to pool scheme costs and charge fees to audited bodies in accordance with our published fee scale, as amended following consultations with scheme members and other interested parties. Pooling means that everyone in the scheme accesses the rates secured via our large-scale competitive procurement process, a key tenet of the national collective scheme.
Additional fees (fee variations) are part of the legal framework. They occur if auditors are required to do substantially more or less work than anticipated, for example if local circumstances or the Code of Audit Practice change or if the Regulator (the FRC) increases its requirements on auditors. Our fee variations process ensures that fees for additional work are robustly assessed. Additional fees cannot be invoiced until we determine them.
Our audit contracts provide for an inflationary increase for 2026/27 audits, based on the ONS annual CPI rate published prior to 1 April 2026, which was 3.0% on 25 March 2026. The increase applies to 2026/27 scale fees and the hourly rates for additional work submitted as fee variations.
The local audit regulations require PSAA to specify the fee scale before 1 December of the financial year to which the audit fees relate. When we consult on and set the fee scale, we aim to update fees to reflect changes in audit requirements.
If a change in audit requirements is substantial and we can reliably estimate the additional fees, we will incorporate them into the fee scale as soon as we can. If we need more information, we use the fee variations process in the interim to assess the ongoing additional work and fees needed. Regulation 17(2) of the Local Audit (Appointing Person) Regulations 2015 enables us to vary fees up or down, where substantially more or less work is needed to complete a Code compliant audit.
Bodies can reduce the risk by:
These actions cannot prevent every fee variation, but they can reduce avoidable additional work and help bodies understand potential costs earlier.